Canada and Mexico will reportedly reject America’s demands on NAFTA

Canada and Mexico will reject the US’s latest proposals for NAFTA but offer to continue negotiating, CNBC reported.

The Trump administration last week made some tough submissions, included raising the auto rules of origin to 85%, up from the current 62.5%, and adding a sunset clause, which would lead to NAFTA expiring every five years unless all three countries agree to extended it.

Mexican and Canadian officials are set to release a joint statement at 3 p.m. ET on Tuesday, following talks that ended Monday.

Trump has threatened to terminate the trade agreement if Canada and Mexico do not agree to his demands. It’s possible that his administration is trying to sabotage the agreement to justify a withdrawal, said Paul Ashworth, the chief US economist at Capital Economics.

“Even if the national impact is limited, a NAFTA collapse would hit certain US states and industries quite hard,” Ashworth said in a note. “Michigan, Illinois and Texas are the states that would suffer greatest disruption. Because of its complex supply chains that cross both borders, the auto industry would suffer the most, with autos accounting for nearly 40% of exports to Canada and 22% of exports to Mexico.”

The Mexican peso weakened against the dollar, trading down 0.2% at 19.0768.